Is School Funding Fair?

An Analysis of School Finance Systems

in 8 Southern States

Related Resources

Is School Funding Fair? An Analysis of School Finance Systems in 8 Southern States

David Sciarra & Theresa Luhm // April 25, 2018

Understanding state school finance systems is crucial to the national effort to ensure access to high-quality education and to close opportunity and achievement gaps among subgroups of students, particularly those that are low-income. Policymakers, educators, business leaders and parents need better and more reliable information in order to identify problems with those systems, and to devise and implement policy solutions and advocacy strategies that advance school funding fairness. Using equity indicators developed by Dr. Bruce Baker of Rutgers University’s Education Law Center’s (ELC) annual report, Is School Funding Fair? A National Report Card, this paper analyzes the school finance systems in eight southern states – Louisiana, Mississippi, Alabama, Georgia, Florida, Tennessee, Arkansas and Texas – and briefly describes the type of comprehensive advocacy effort needed to ensure that all students have the resources necessary to succeed.

Why Money Matters

There is an increasing body of evidence that substantive and sustained state school finance reforms matter for improving both the level and distribution of short-term and long-run student outcomes. In a 2002 study, Card and Payne found “evidence that equalization of spending levels leads to a narrowing of test score outcomes across family background groups.”[1]

Most recently, Jackson et al. evaluated long-term outcomes of children exposed to court-ordered school finance reforms, finding that “a 10% increase in per-pupil spending each year for all 12 years of public school leads to 0.27 more completed years of education, 7.25 % higher wages, and a 3.67 percentage-point reduction in the annual incidence of adult poverty; effects are much more pronounced for children from low-income families.”[2]

ELC’s National Report Card (NRC) applies regression-based methods to national data on all local public school districts to characterize and compare state school finance systems. Specifically, it evaluates whether those systems lead to consistent targeting of resources to districts serving higher concentrations of children from economically disadvantaged backgrounds. Four separate “fairness indicators” are covered in the NRC – Funding Level, Funding Distribution, Effort and Coverage.[3]

[School Funding: Deep Disparities Persist 50 Years After Kerner]

Funding Level
The first indicator, Funding Level, measures the overall level of state and local revenue provided to school districts, and compares each state’s average per‐pupil revenue with that of other states. To recognize the variety of interstate differences, each state’s revenue level is adjusted to reflect differences in regional wages, poverty, economies of scale, and population density. The NRC ranks states from highest (1) to lowest spending (50) per pupil.

Of the eight southern states that are the subject of this essay, all but one (Louisiana) score in the bottom third of the 50 state distribution and three are in the bottom ten — Mississippi (44), Tennessee (43) and Florida (41). And, as demonstrated in the chart below, over the last ten years, all of the rankings have been consistently low, with Georgia and Florida falling significantly further behind over that time period.

What this means is that for many years, southern states have been providing substantially less funding for education than most other areas of the country. In some cases, they are providing less than half the amount as the highest spending states. For example, New York and Alaska, the highest ranked states overall, provide a regionally adjusted $18,719 and $18,586 per pupil respectively, while Tennessee and Mississippi, the two lowest ranked southern states, provide an adjusted amount of $7,454 and $7,213 respectively.[4]

Funding Distribution
The second fairness indicator, Funding Distribution, examines the distribution of funding to districts within states, relative to student poverty. This measure addresses a key question: to what extent are existing state funding systems or formulas sensitive to changes in the rate of student poverty? This metric is calculated by looking at per-pupil funding amounts for districts within the state at poverty levels of 0%, 10%, 20%, and 30%. A state with a high ratio between high- and low-poverty districts is a progressively funded state — in other words, poor districts get more funding than wealthy districts. A state with a low ratio is a regressively funded state — in other words, poor districts receive less funding than wealthy districts.

The results on this indicator are mixed. Alabama and Texas are regressive, meaning they provide less funding for low-income students. Florida, Louisiana, Mississippi and Tennessee have flat distributions, meaning they provide about the same amount of funding to students across income levels. Only Georgia and Arkansas are progressive, indicating that they provide additional resources to high poverty students. There has minimal improvement on this indicator over the last decade as only Florida has moved from regressive to flat.

How a state distributes funding is important because concentrated student poverty in schools generates greater needs that, in turn, require resources to support effective programs and strategies, such as high quality early education, full-day kindergarten, after-school and summer-school programs, and smaller classes in the early grades.

Effort
The third indicator, Effort, measures differences in state spending for education relative to state fiscal capacity. Effort is defined as the ratio of state spending to gross state product (GSP). Combining these two elements into a ratio provides a sense of the priority education is given in state and local budgets. It addresses a critical question: What level of effort is a state making to fairly fund its public schools?

On this indicator, Arkansas and Mississippi rank near the top of the 50 state distribution while Alabama, Georgia and Louisiana are about average and Florida, Tennessee and Texas allocate a relatively small proportion of their economic productivity to education. It should be noted that despite the relatively high effort made by some of these states, it does not yield high funding levels because of the states’ low fiscal capacity. In contrast, the states exerting low effort are failing to take advantage of their economic productivity to fund their schools.

One troubling finding is that all but four states nationwide declined on the fiscal effort index between 2008 and 2015, and some states in the south experienced especially significant declines. The fiscal effort index decreased in Florida by 26%, Georgia by 19% and Alabama by 17%. While the Great Recession was likely a major cause of the decline, there has been little improvement on this indicator in the past few years even as the economy has improved.

Coverage
The last indicator, Coverage, measures the share of school‐aged children enrolled in public schools and the degree of economic disparity between households in the public and nonpublic education systems. On this indicator, all but two of the southern states (Arkansas and Texas) fall in the bottom half of the state rankings with Louisiana in second to last place overall with only 80% of children enrolled in public school, and a huge disparity (183%) in income between public and nonpublic school households.

There are two important consequences to wealthier families opting out of public education: these opt-outs further concentrate poverty and increase the need for resources in schools, and they can affect the public and political will necessary to generate fair funding through a state’s school finance formula.

Interpreting the Results
In examining the results, consideration should be given to all four measures, rather than to any one. The combination of the measures offers deeper insight into state finance systems. For example, even though Arkansas and Georgia show progressive funding distribution patterns, their overall level of funding is extremely low, meaning no students are getting as much as they need. Mississippi makes an above-average effort, but given its gross state product, its funding level is well below the national average and does not provide any significant increase in funding for higher-poverty schools. Florida, Tennessee and Texas score poorly on all measures with low funding levels, low fiscal effort and flat or regressive distribution of funds. The complexities, and sometimes inconsistencies, of the finance systems require careful consideration of the state’s performance as a whole.

Advocating for Change
Improving student outcomes will require states to reform their finance systems, which have historically been based on tax and budgetary considerations, to systems driven by student and school need. The core objective is to move towards school funding that provides every student the essential resources needed for a meaningful opportunity to achieve the state’s academic standards. In order to meet this goal, states need to conduct rigorous cost-studies that align funding with each state’s unique curricular standards. These cost studies can then be used to design research-based, progressive formulas that provide an adequate level of funding to meet the needs of all students.

It is important to recognize, however, that modernizing school funding in the southern states requires building and sustaining comprehensive advocacy campaigns for finance reform, focused on state elected officials. Previous efforts have met with limited success because they have often been piecemeal, episodic and disconnected from broader reform efforts. Litigators sue over inadequate school funding; organizers work to empower parents and communities; advocates press for policy change; and researchers produce reports on a wide range of educational inputs, outputs and costs. But it is unusual for these different, but crucial, strands of work to be integrated into focused and sustained advocacy campaigns. Changing long-standing and seemingly intractable inequities in school funding demands a comprehensive multi-pronged advocacy strategy.

How we fund our public schools is fundamental to ensuring all students have access to high quality educational opportunities that prepare them for the future. Sufficient school funding, fairly distributed to districts to address the increased needs of students living in concentrated poverty, students with disabilities and English language learners, is an essential precondition for the delivery of a high-quality education.

[1] Card, D., & Payne, A.A. (2002). School finance reform, the distribution of school spending, and the distribution of student test scores. Journal of Public Economics, 83(1), 49-82.

[3] For a full explanation of the methodology used to develop the four fairness indicators, see: Is school funding fair? A national report card technical report (2010) by Bruce Baker and Danielle Farrie at: http://www.schoolfundingfairness.org/is-school-funding-fair/reports

[4] Complete charts with rankings of all 50 states on all four indicators can be found in the 7th edition of Is school funding fair? A national report card (2018) at http://www.schoolfundingfairness.org/is-school-funding-fair/reports